Amid regulation talks, cryptocurrency investors reveal what draws them to the new investment option

Amid regulation talks, cryptocurrency investors reveal what draws them to the new investment option

As rumours make the rounds that the Union government may bring a ban on cryptocurrencies, FPJ explores the size and motivations of the crypto investor community in the country

Jescilia KarayamparambilUpdated: Saturday, November 27, 2021, 10:10 PM IST
Photo: Pixabay

Many governments around the world are struggling to take a stand on cryptocurrencies (also called crypto). But a recent comment by Commonwealth Bank of Australia’s Chief Executive Officer Matt Comyn on cryptocurrency may explain the psyche of crypto investors whose numbers keep swelling, despite uncertainty around this asset. Comyn states that one of the biggest risks banks face when it comes to this digital asset is being left out. But this fear is not limited to banks.

The fear of being left out is the exact reason why Sid, a commerce student from Mumbai (who did not want to give his full name), ventured into trading in cryptocurrencies. Sid’s parents gave him a small amount of money, which he invested in stocks. The investment yielded profits which he then put in crypto. He explains, “I decided to invest in cryptocurrencies as a means to diversify my investment portfolio and also not to be left out as the cryptocurrency (investing) community grows."

According to broker discovery and comparison platform BrokerChooser, the total number of crypto investors in India is around 10.07 crore, making India home to the largest crypto investor base in the world.

As the buzz around cryptocurrencies increases, their popularity continues to skyrocket, claims Saurabh Tiwari, who began investing in crypto in 2016. “I have seen the ups and downs in this asset. I gained and even lost a lot of money. But that did not stop me.” Tiwari today has taken on the mantle as an advisor to companies and policymakers on this topic.

After news came out that the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 is listed for the winter session, scheduled to start from November 29, panic reflected in the trading of cryptocurrencies. When the news broke, investors rushed to trading platforms like WazirX and CoinDCX, and as a result both crashed. Yet many people hardly see any cause for alarm. Anurag J Shrivasatava, co-founder, AD’s Group says, “The government is not going to accept crypto as a currency, but they will accept it as an asset class. Even as an asset class, they will have a system where SEBI or other regulators can regulate it. This is mainly to know which crypto is good or bad.”

Started with stocks, now into crypto

Speculation and volatility are worrisome aspects of this digital asset. So thinks billionaire and ace investor Rakesh Jhunjhunwala,who may have taken a bet on many stocks which paid off big, but who is reluctant to invest in cryptocurrencies, vocally so.

Tiwari, who is also an angel investor, says, “I trade in the stock market as well. And I admire Jhunjhunwala’s philosophy on diversification of investments.” Responding to a question why he did not follow Jhunjhunwala’s path on staying away from digital assets, he reasons, “The stock market is volatile. So is cryptocurrency.” Tiwari believes investing in crypto is about the appetite for risky investments that can also at times give high returns.

Stock markets require one to look at a company’s position, its technicals, the economy, and other elements before investing; crypto requires investors to look at technicals and other factors too, Tiwari says.

Anurag J Shrivasatava believes that before investing “every individual should understand every project or cryptocurrency or non-fungible tokens (NFT) which he or she wants to invest in”. What surprises Shrivasatava is the way people are investing in meme-based cryptocurrencies and NFTs (NFT backed by a creator is a better option). “Investing in meme-based cryptocurrencies and NFT is a pure gamble,” exclaims Shrivasatava. In his words, “One should always have a WHY to invest in a project.”

To this, Tiwari says, “Avoid shitcoins (a coin with no value or purpose).”

Going crypto

The way the stock market evolved, crypto will evolve too, Tiwari shares. Echoing this thought, Shrivasatava says, “Initially, there will be a teething problem. But that will not stop cryptocurrency or NFT from booming.”

According to Valuates Reports, the global cryptocurrency market size was valued at USD 1.49 billion (around Rs 11,100 crore) in 2020 and is projected to reach USD 4.94 billion (around Rs 36,800 crore) by 2030, growing at a compound annual growth rate (CAGR) of 12.8 per cent from 2021 to 2030.

Looking forward, there will be cryptocurrency funds, like stock market-focused funds, which will be managed by asset managers for retail investors, Shrivasatava says. “As the (crypto) market evolves there will be blockchain funds. At present, some funds in the United States invest in bitcoin when its price falls.”

Why blockchain is so hot right now

Blockchain is the technology that enables the existence of cryptocurrency. It is a system that captures every piece of information, making the whole process transparent, leaving no scope for leakages. According to a report by Invest India, in 2020 the global blockchain market size was estimated at USD 3 billion (Rs 22, 300 crore) and is expected to reach USD 39.7 billion (Rs 2,95,700 crore) by 2025.

In India, blockchain solutions have found the most takers in banking, financial services and insurance industry. Some blockchain experts argue this is scratching the surface. “The negative publicity around cryptocurrency makes it difficult for anyone to look beyond — in a way affecting technology like blockchain,” says a startup co-founder.

Commenting on this technology’s potential, Aliasgar Merchant, Developer Relations Engineer with Tendermint, said, “The technology by itself is very sustainable. However, the use it is put to can be questioned. Blockchain technology is revolutionary and sets out to solve many real-world problems.”

Echoing similar sentiments, Oliver Nasralah, Co-Founder of The Red Order said, “Blockchain technology has a long way to go before reaching critical mass in adoption and use. The more people interact with the technology, in any way, the higher the likelihood of mass adoption.”

In India, Anurag J Shrivasatava, co-founder, AD’s Group states, other than the financial industry, the healthcare industry is looking at blockchain. “Blockchain can support the education sector as well. It will work wonders for the charity sector as blockchain is all about transparency. It will fix leakages. The transparency this technology can bring may scare many.”

Crypto gaming: Alternative source of income for gamers

Compared to regular online games, crypto games entertain and provide an opportunity to make real money through playing. Mostly, game developers and studios profit from in-game purchases made by users. But crypto games enable users to make money when they play — after buying virtual products like armour, swords, or cars in the virtual game and achieving the objective of the game — and earning money in the form of crypto, which is then traded for real money. Some popular crypto games are Axie Infinity, CropBytes, Gods Unchained and others.

Nancy Beaton, VP Strategy and Blockchain, Together Labs claims, “Players can work their way into a full-time earning capacity doing what they love or continue to make supplemental income. But with any online shop or side hustle, earners need to understand what it means to be a self-owned business and the responsibilities of benefits, taxes, time, etc. that are typically delivered by a traditional company. Being a full-time gamer, influencer or other is no different.”

Alternate models of earning are now becoming mainstream, says Aliasgar Merchant, Developer Relations Engineer at Tendermint. He states, “We are seeing the rise of social media influencers like those on TikTok, Instagram and Facebook. That said, such mechanisms for making money are highly volatile and one should not be 100 per cent dependent on that.”